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Question
How is gain ratio calculated?
Short/Brief Note
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Solution
When a partner retires, the remaining partners gain in terms of the profit-sharing ratio. This gain is called the Gaining Ratio. When a partner retires, remaining partners distribute his share of profit among themselves.
Gain Ratio: When a partner retires, the remaining partners gain in terms of the profit-sharing ratio.
This gain is called the Gain Ratio.
Formula used in gaining ratio
Gaining ratio = New ratio - Old ratio
New Ratio = Old + Gain
Gaining ratio = Retiring partner's share × Acquisition Ratio
New Ratio = Old Ratio + Gaining Ratio
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